Oil Rallies in Early Monday Trade

6/20/2016 | 9:03 AM CDT

By George OrwelDTN Refined Fuels Editor

NEW YORK (DTN) -- New York Mercantile Exchange oil futures with nearest delivery contracts extended higher as part of a broader relief rally at the start of regular trade Monday morning, as the U.S. dollar tumbled versus key world currencies on shifting sentiment in Britain after opinion polls showed voters willing to let the United Kingdom remain a member of the European Union.

The dollar fell to an 11-day low versus a basket of six major currencies with the sterling pound up 2%, the biggest one-day gain since 2008. Risk on trade is driving equity markets. Concerns over an exit from the EU by Britain spurred worries over economic growth last week and several central banks reacted by keeping interest rates unchanged, but those worries have since eased after two weekend polls showed the remain camp up 3% over the leave camp.

More Recommended for You

Recommended for You

At 9:00 AM ET, NYMEX July West Texas Intermediate futures gained $1.00 to $48.98 bbl, off one-week high of $49.08. With the July WTI futures contract set to expire on Tuesday, an increase in market activity on the August contract is expected during regular session trade today.

The August WTI contract was up 98cts at $49.66. ICE August Brent futures climbed $1.04 to $50.21 bbl, off a one-week high of $50.35. In products trade, NYMEX July ULSD futures rallied 2.87cts to $1.5104 gallon, near a $1.5122 one-week high. July RBOB futures rose 3.58cts to $1.5411 gallon and near a $1.5437 one-week high. On fundamentals, oil demand this year has so far outpaced expectations, prompting the International Energy Agency last week to revise higher its oil demand growth forecast for 2016 by 200,000 bpd to 1.3 million bpd. Unplanned supply disruptions in Canada and Nigeria tightened the oil market last month, according to the Energy Information Administration. However, Canadian production is slowly returning to normal and the Nigerian government is in talks with militants that could end attacks on oil and gas infrastructure.

In pre-market trade, oil futures continued to recover after Thursday's plunge, rallying despite a new report by Baker Hughes Inc. showing the number of active oil rigs in the United States increased for a third straight week, suggesting the potential for higher production. The report showed an increase of nine rigs for the week-ended June 17, bringing the total number of additional oil rigs to 21 since May 27. One of the factors helping the oil futures complex is the tightening demand and supply balance, as the summer peak driving season gets underway.

Monday marks the summer solstice. IEA last week revised its outlook, saying oil supply and demand would come into balance earlier than previously thought, in the second half of 2016 instead of early 2017. Other analysts were skeptical about further gains in oil futures, however. "Fundamental support for crude oil is fragile--it's dependent on significant Nigerian production remaining offline," said analyst Tim Evans at Citi Futures. "Inventories are high and possibly still rising. Money managers [are] overinvested in the idea that the market is rebalancing, or already has rebalanced, and vulnerable to bearish news."

Related Content

Recommended for You

Contact Us

About DTN

DTN delivers accurate, objective, real-time, and actionable insights to increase our 2 million customers’ confidence and support their business decisions. In a data-rich world, our actionable insights in weather and financial analytics make sense of the information, drive change in processes and help businesses prosper. They empower our agriculture, energy and transportation customers – those who work endlessly to feed, fuel and protect our world. We believe that when our customers are supported with the most reliable and innovative information to the Nth Degree, they prosper and we all win. DTN is based in Minneapolis with offices globally.

Join the community! Registration is FREE. As a member of the DTNPF online community you can contribute to discussions, save your settings, get exclusive email alerts and access to special online sections, and read e-newsletters.

Please correct the following errors and try again:

First Name*

Last Name*

Postal Code*

e.g. 68114 (US) or Y0B 1G0 (Canada)

Phone Number*

e.g., 402-390-2328

Email Address*

Confirm Email Address*

Password*

8-32 characters, include one number (0-9) and one letter (a-z)

Confirm Password*

I agree to receive information from DTN/The Progressive Farmer containing news, updates and promotions regarding DTN/The Progressive Farmer's products. I understand I can withdraw my consent at any time.